Introduction to this report:
Profit forecasts were lowered, target prices were lowered, and an increase in holdings rating was given; performance fell short of expectations and profitability was impressive; overseas production began in the second half of the year, and there are already projects for high-end products.
Key points of investment:
The profit forecast was lowered, the target price was lowered, and an increase in holdings rating was given. The company released its 2024 quarterly report, and the performance fell short of expectations. Considering that the company was mainly affected by personnel fluctuations, we lowered net profit to the mother for 2024-2026 to RMB 1,474/22.36/2,790 billion yuan (-6.06%/-1.48%/-3.71% compared to the previous forecast change), and the corresponding EPS was 3.73/5.66/7.07 yuan. Considering industry valuations, it was given 36x in 2025, and the target price was lowered to 203.88 yuan (previous value: 214 yuan), and an increase in holdings rating.
Revenue fell short of expectations, and profitability was impressive. The company achieved revenue of 731 million yuan in 2024Q1, an increase of 154.95% year on year; net profit to mother was 278 million yuan, up 202.68% year on year, which was roughly the same. Previously, the market overestimated passive income, and performance fell short of expectations. The passive part is greatly affected by personnel changes during the Spring Festival. At the same time, although some high-speed product lines are more expensive in the industry, the yield is low, and it will take time to expand. On the cost side, Q1 increased the incentive fee by about 20 million month-on-month. Inventory Q1 declined compared to the end of the year, mainly to remove some sluggish inventory. However, contract liabilities are still increasing month-on-month, and we think the overall business trend is improving.
Overseas production began in the second half of the year, and there are already projects for high-end products. The Thai plant is expected to be built in two phases. The first phase is expected to be tested in the first half of the year, and is expected to be delivered after passing customer certification. We expect some active and passive product lines to be shipped from overseas in the future, which can better serve Thailand's optical communication clusters and global customer delivery. Furthermore, the 1.6T project that the market is concerned about is in the research stage, and further progress is worth looking forward to.
Catalysts: Active products continue to be released, and profitability continues to increase.
Risk warning: Fluctuations in production and operation, shortage of supply chain materials, etc.